NEW YORK, Aug 10 (Reuters) - Southwest Airlines (LUV.N) boosted its offer to more than $170 million for bankrupt Frontier Airlines Holdings Inc FRNTQ.PK on Monday, saying its plan would offer unsecured creditors a higher return than a competing bid.

The low-cost carrier’s binding offer was higher than its initial proposal of $113.6 million in late July and exceeds an earlier $108.75 million deal from Republic Airways Holdings Inc RJET.O.

Southwest officials said their deal would give unsecured creditors 12 cents on the dollar, higher than the 8.7 cents per dollar outlined in a bid by Republic.

The Dallas-based carrier said it would present its bid to Frontier on Wednesday in New York. An auction for Denver-based Frontier is slated for Aug. 13.

“Frontier is for sale in bankruptcy, so something is going to happen to Frontier over the course of this week and we want to be a part of that,” Southwest Executive Vice President Bob Jordan said during a call with reporters.

Among the beneficiaries of this deal could be Republic itself, Frontier’s largest unsecured creditor. Executives said Republic could get about $20 million from its unsecured claims if Southwest winds up buying the Denver-based carrier.

Southwest’s bid also offers Frontier $50 million in debtor-in-possession financing, about $10 million more than Republic currently does. If it won, Southwest would repay Republic’s DIP financing and pay it a break-up fee of up to $4 million.

Frontier shares would be canceled and Southwest executives said the company would assume some of Frontier’s debt in the deal, but did not offer an exact figure.

Republic spokesman Carlo Bertolini said the company hadn’t changed its original bid.

“The actual gap between the two bids, as it relates to creditors other than Republic Airways, is actually in the neighborhood of $5 million or $6 million,” he said. “The difference is not as large as it appears to creditors.”

Steve Snyder, a Frontier spokesman, said the company was studying Southwest’s bid and could not comment further.

“One potential sticking point is that (Republic) is one of the largest creditors of FRNTQ and would have to agree,” said S&P analyst Jim Corridore in a note. “Even so, we think LUV’s bid is likely to prevail.”

FLEET PLANS; RETAINING LYNX

In a release, Southwest said it would acquire about 40 planes in Frontier’s existing Airbus fleet and Lynx Aviation, a Frontier subsidiary that operates 11 Bombardier Q400 planes and serves 15 regional markets around Denver.

A transition to Southwest’s Boeing 737s and the retirement of Frontier’s planes would occur over a period of 24 months.

In a call with reporters, Southwest executives made clear the company wanted to retain Lynx beyond those two years, describing the subsidiary as a profitable asset.

“We’re learning from Frontier in this case that Lynx is a valuable asset,” said Executive Vice President Ron Ricks.

Southwest said it would maintain its existing markets and add new nonstop routes from Denver not currently served by either carrier.

Southwest shares fell 2.6 percent, or 24 cents, to $8.87 on the New York Stock Exchange. Republic Airways was off 29 cents, or 4.9 percent, at $5.65 on Nasdaq.